One of a huge problems confronting the economy now is the weakness in household incomes. Without decent growth in income, consumer spending will be constrained unless households decide to either run down savings or add to debt, neither of which is sustainable in the long run.

The wage data today confirmed the wage price index up rising by 0.6 per cent in the December quarter or 2.5 per cent over the year. This is the weakest rate of increase in any roughly comparable wage measure I can find in data bases going back to the 1960s.

The link to the wage and income freefall is simply more than two years of below trend economic growth and rising unemployment. It reflects terrific labour market flexibility yet screams from the rooftops the need for some policy stimulus to get economic growth back above trend (3.5 per cent plus) which would see the unemployment rate fall, which in turn would deliver a welcome lift in wages.

As noted many times, the RBA is doing its bit with interest rates at record lows. The more interesting question is whether in the budget, which is now just two and a half months away, will have an eye on growth and jobs or whether there will be more of the ridiculous economic incompetence of striving for a fiscal surplus.